The cryptocurrency market is a highly volatile environment that can experience savage, wild swings at a moment’s notice. It’s essential to stay on the top of your game at all times when playing the crypto game. With this in mind, in this article, we’ll be presenting 12 of the most common mistakes made by traders.
Even the most experienced crypto traders fall into these traps on a regular basis. It’s important to take some time to step aside from the screen and assess your strategies and habits, critiquing your trading process to ensure avoiding these common snares.
The 12 Cryptocurrency Trading Mistakes Everyone Should Stop Making Now
We’ll now proceed to break down the 12 most common mistakes that cryptocurrency traders of every skill level are prone to make without even being aware of them:
1. Persistence Despite Constant Repetitive Failure
While persistence in the form of adversity is a powerful technique that can help you overcome many obstacles in life, it’s very different from persistence in the face of failure. Addressing adversity involves learning, research, introspection, and self-assessment.
Booking consistent losses on a strategy, however, and failing to make any adjustments or assessments to correct a failing technique, is one of the most obvious mistakes a trader can make. It’s important to keep in mind that in many cases the approach itself is the problem. Always avoid attributing consistent losses to variance or “bad luck”.
2. Failing to Analyze Losing Trades
Many traders, when experiencing a loss, are content to sweep failure away under the rug without assessing the reasons why it occurred. It’s impossible to make a correction without understanding what needs to be corrected first- always dismantle your losses to determine as best you can where you went wrong.
3. Missing Critical Trades From Your Watch List Due to Inattention
This seems like a glaringly obvious mistake, but in the fast-paced cryptocurrency industry it can be extremely easy to lose focus. Always be sure to set an alert. If you’re intent on selling when a security reaches $30, and it’s currently hovering around the $25 mark, make sure you set an alert for $29.50. Using this method, you’ll never miss another breakout.
Don’t neglect your watch list- leaving a trade for dead because you noted it but didn’t set an alert is an extremely frustrating position- there’s nothing worse than finding a hastily scrawled note to yourself regarding a potential breakout several days after the rush is over.
4. Taking on Trades That Don't Meet Your Strategy Criteria
If you're focused on a specific strategy that works for you, stick to what you know. You’re not making fruit salad, you’re trading. Why trade apples and bananas if you’re geared towards oranges? Avoid unnecessary complexity or variance.
5. Flying Blind Without a Concrete Trading Strategy
This is another glaringly obvious mistake, but the extremely accessible nature of the cryptocurrency industry has led to many market players entering the fray with little to no oversight or plan. You may have picked a crypto that you like- it may even be performing well- but now what?
When do you sell? What is your target? Have you considered stop losses? Have you considered the fact that the trade may not even work out at all? It’s essential to consider these factors before even getting on board.
6. Buying in on Somebody Else’s Trade
You might find that surrounding yourself with like-minded crypto traders results in shared ideas and strategies. Avoid getting into a situation, however, where you are reliant on your peers to tell you whether you should stay in or get out. If you’re taking on a trade, it’s essential that you own it, regardless of where it came from.
7. Revenge Trading
The market doesn't care if you win or lose. Many traders make the mistake of chasing a poorly performing trade just because the crypto they’re trading has caused them to lose money before and it “owes them”. This superstitious thinking is all too common in the crypto ecosystem.
8. Playing Favorites
This mistake is closely related to mistake #7. If a crypto ended up generating you a tidy profit, it’s likely that you may come back to it even though you most likely should avoid it.
This mistake is far more common and harder to shake than number 7, as getting rid of the good vibes can be harder than the bad. Always play the crypto market with a detached mindset free from emotional.
9. Ignoring Stops Altogether
Ignoring your stops is one of the worst mistakes you can make. Regardless of how effective your technique is, if you’re ignoring your stops then your trades are becoming investments- and, in most cases, they generally turn out to be bad investments.
10. Over Trading
The extremely fast paced nature of the cryptocurrency market makes over trading one of the worst mistakes a trader can make. Over trading leaves traders maxed out, stressed, and trying to achieve too much in a single day.
You may have never intended to become a crypto day trader, but you’ve found yourself getting in and out several times on a daily basis. In these scenarios, it’s best to sit out a few rounds in the penalty box while you collect your wits- in most cases, however, traders chase losses trying to grind it out. Avoid this at all costs. Over trading also brings us to our next mistake, which is…
11. Under Trading
Experiencing a string of losses has the propensity to freeze your trading. Riding the pine and ignoring quality signals are some of the most common signals of under trading. If you’re feeling the burn, it can be best to take a short break and assess why everything went pear-shaped, then get your act together, but be sure to act before too long. “Taking a break” can often be the same as hiding in fear.
12. Time Frame Commitment Refusal
It’s important to position yourself firmly in either the daily, short term, or long term cycle. While having a couple of different portfolios, it’s important to ensure that you possess a concrete time frame in which you plan to achieve ROI. In most cases, scattershot approaches are the least efficient.